AT&T Chmn. Michael Armstrong said Tues. that while expected Sec. 271 entry of Bell companies into long distance in virtually every state next year would have state-by-state impact on AT&T’s long distance revenue, he saw signs of hope that states were beginning to pay attention to economically viable resale rates for local exchange service. “If PUCs and the FCC begin to pay attention to the economic viability of the local exchange, this pattern [of no competition] is going to change,” Armstrong told UBS Warburg Global Telecom Conference in N.Y. While executives of Verizon, SBC and AT&T all reiterated their stances on what they said needed to change in regulation of local loop access and state price caps on LECs, questions on regulatory impact on company revenue took on immediacy as IXCs and Bell companies prepared for more widespread RBOC long distance entry next year. Verizon Co-CEO Ivan Seidenberg spoke out against govt. competitive access policies that he said created “irrational” competition by flooding market with competitors who weren’t facilities-based. “The government would be smart to get out of the way, to stop controlling our prices,” Seidenberg said. “Having 2 or 3 rational competitors in a market is good. I like that,” he said. “Now we have 2 or 3 rational players and 7 or 8 irrational players.”
Wireless Spectrum Auctions
The FCC manages and licenses the electromagnetic spectrum used by wireless, broadcast, satellite and other telecommunications services for government and commercial users. This activity includes organizing specific telecommunications modes to only use specific frequencies and maintaining the licensing systems for each frequency such that communications services and devices using different bands receive as little interference as possible.
What are spectrum auctions?
The FCC will periodically hold auctions of unused or newly available spectrum frequencies, in which potential licensees can bid to acquire the rights to use a specific frequency for a specific purpose. As an example, over the last few years the U.S. government has conducted periodic auctions of different GHz bands to support the growth of 5G services.
Sen. Wyden (D-Ore.) called on the FCC Fri. to undertake comprehensive spectrum reform toward more market-based policies, echoing theme at day-long American Enterprise Institute (AEI)-Brookings conference that focused on how to make U.S. spectrum policy more flexible. “The FCC has taken some baby steps in the direction of spectrum markets,” Wyden said, noting that if reform proceeded on “band-by-band basis, we'll be at this for a long time.” NTIA Dir. Nancy Victory said she would hold summit early next year to solicit “out- of-the-box ideas” on spectrum management policy. Among issues conference focused on were continued need for existing auction process, how to expand secondary markets for spectrum, how FCC could encourage innovation and new wireless technology and how to define spectrum rights without limiting technology that could be used. Victory also provided assurances that “the rumors of 3G’s death are greatly exaggerated,” although she acknowledged attacks of Sept. 11 had impact on process: “Nonetheless, work is proceeding.”
Verizon Wireless said Fri. it plans to hold its long- awaited IPO in mid-2002, according to SEC filing. It also disclosed that last March it had received letter of inquiry on behalf of 22 state Attorneys Gens. seeking information on advertising and marketing of several products and services and information on billing practices. Carrier said it had provided documents and other requested information. “We cannot predict whether this inquiry will continue and, if it does, what impact, if any, it may have on our business practices or results of operations,” company said. Reuters reported Fri. that Sprint PCS had received similar inquiry and was providing information. Amended registration statement, which is first time that Verizon Wireless has updated its prospectus for IPO since it was filed in Aug. 2000, describes risks typical in such filings. Filing came as Verizon and other carriers were in homestretch of negotiations with govt. and NextWave over latter’s PCS licenses. Verizon Wireless had won thsy spectrum in Jan. re- auction before U.S. Appeals Court, D.C., overturned results in summer. “If we are not awarded all of the spectrum licenses we won in the auction, we will need additional spectrum in some of our most densely populated markets to meet anticipated demand within the next 3 years,” filing said. “The acquisition of the 1900 MHz spectrum, while it would help us to meet our shorter term spectrum needs, would still leave a longer term capacity risk.” Earlier plans for Verizon’s IPO had entailed its raising nearly $5 billion.
FCC voted 3-1 at Thurs. meeting to repeal wireless spectrum cap Jan. 1, 2003, and raise it to 55 MHz in all markets during transition period. Comr. Copps delivered impassioned dissent, arguing that “in almost every market in the country, companies have not reached the cap.” Both Bush Administration and CTIA had urged Commission not to implement transition period but to remove restrictions immediately. But FCC said “orderly” transition is needed to allow it to consider what guidelines are required to move from bright- line approach of cap to case-by-case review of wireless license transfers. To assure FCC that Justice Dept. will continue to review such mergers for anticompetitive behavior on case-by-case basis, Asst. Attorney Gen. for Antitrust Charles James wrote to Chmn. Powell Wed.: “The department will continue to safeguard competition through its enforcement activities in the industry and does not believe removal of the spectrum cap rules will diminish its ability to do so.” FCC also eliminated cellular cross-interest rule in urban markets, but kept restriction in place for rural service areas. Spectrum cap has been 45 MHz, except in rural areas, where FCC raised it to 55 MHz in 1999. Interim period raises it to 55 MHz everywhere.
With FCC vote on wireless spectrum cap set for today (Thurs.), Commission has seen flurry of ex parte filings, including letter from Senate Commerce Committee Chmn. Hollings (D-S.C.) urging that 45 MHz ceiling be retained. “Since none of the current license holders are using all of the spectrum they already possess, we see no pressing need to make changes to the spectrum cap,” said letter to FCC Chmn. Powell Tues. from Hollings, Sen. Inouye (D-Hawaii) and Rep. Markey (D-Mass.). “Relaxation or elimination of the cap is likely to encourage unnecessary consolidation, relieve pressure on companies to innovate and pose a significant risk to consumers in the form of higher prices and fewer choices. This is the very result the cap was put in place to avoid.” Letter from Democrats appeared to be only public dissent from Capitol Hill on issue this year. FCC is expected to approve lifting cap to 55 MHz for 12-18 months, after which it would sunset completely.
House Speaker Hastert (R-Ill.) expects to move broadband legislation by year-end, but it will remain separate from any economic stimulus package that reaches House floor, aide Timothy Kurth said Tues. at Schwab Capital Markets conference in Washington. Kurth said bill (HR-1542) by House Commerce Committee Chmn. Tauzin (R-La.) and ranking Democrat Dingell (Mich.) was seen by Hastert as legislative vehicle to spur broadband deployment, particularly since it already had been approved at the committee level: “My boss is looking at completing action on this by the end of the year.” He declined to comment on possible movement of Tauzin-Dingell or other deregulatory measures in the Senate, where opponents such as Senate Commerce Chmn. Hollings (D-S.C.) not only have vowed to block such legislation, but have introduced bills that would bolster regulation of Bell companies and increase fines for noncompliance.
FCC Chmn. Powell’s response to criticism of Commission’s Ch. 60-69 spectrum clearing order correctly places problems with DTV transition on shoulders of Congress, said Norman Ornstein and Michael Calabrese, of American Enterprise Institute and New America Foundation, respectively. However, they reiterated their concerns that FCC’s decision (CD Sept 18 p2) to allow “voluntary band-clearing arrangements” between broadcasters and wireless companies “amounts to one of the most expensive and unjustifiable grants of corporate welfare in our nation’s history.” Powell recently sent reply letter to Senate Commerce Committee Chmn. Hollings (D-S.C.), who last month (CD Oct 18 p5) expressed outrage that FCC order would enable private sector to negotiate terms of and profit from spectrum sales. Ornstein and Calabrese said “as Senator Hollings suggests, allowing self-interested private parties to determine the public’s share of the revenue from a public asset appears inconsistent with the FCC’s fiduciary role as the public trustee of the airwaves.” They said Commission’s order “ignores alternatives” such as: (1) Imposition of “squatter’s fee” on broadcasters that failed to return analog spectrum on time, measure that had been recommended by former FCC Chmn. William Kennard. (2) Imposition of “hard deadline” on broadcasters, as suggested by House Commerce Committee Chmn. Tauzin (R-La.). (3) Earmark auction revenue “to subsidize digital tuners or converter boxes for citizens who [in 2006] still rely on over-the-air signals.”
Space Data was high bidder on more than 1.4 MHz of national narrowband PCS spectrum in FCC auction of 900 MHz band. Space Data said it would pay $4.2 million for licenses after small business and tribal bidding credits were taken into account. “This is an extraordinary value,” Chmn. Jerry Knoblach said: “In 1994, at the first FCC narrowband PCS auction, this much spectrum would have cost more than $1.1 billion.” Space Data said it planned to use spectrum to deploy technology that used weather balloons combined with communications technology to provide broadband services to rural areas. Company said it planned to operate mostly as carrier’s carrier by serving existing wireless providers, allowing them to extend reach of their networks without cost of building towers or turning to satellites. FCC Wireless Bureau had approved company’s balloon-based technology in Sept. When Commission approves its license applications, Space Data said it will hold licenses that cover 1.5 MHz of nationwide spectrum. It said it had patents pending for its “unique technology.” Company indicated it already had raised private funding to develop its technology and finance its spectrum acquisitions and now planned to arrange institutional financing to roll out its network. Space Data also said that Jicarilla Apache Nation in N.M. had adopted resolution that required that company receive bidding credits under FCC’s auction program.
Administration has ironed out proposed legislation that would reinforce terms of pending NextWave settlement agreement, on PCS licenses expected to be announced in matter of days. Draft of legislative language obtained by Communications Daily outlines proposed terms of pending agreement, including timing in which NextWave would receive $9.55 billion by Dec. 31, 2002. At that time, it immediately would pay $3.05 billion in federal taxes. Draft lays out payment road map in which govt. would be paid before NextWave, although carriers could pay after June 30, 2002, following FCC completion of all regulatory steps needed to award licenses. Draft appears designed to address concerns raised by Sen. McCain (R-Ariz.) last week on risk that settlement funds would be paid out by govt. before full agreement was final. Draft bill describes in detail how federal courts would be directed to handle any legal challenges involving disputed spectrum on expedited basis. Under settlement, govt. would be paid $10 billion and NextWave $6 billion, not counting all of its tax obligations (CD Oct 29 p1).
National Telephone Co-op Assn.’s (NTCA) survey on spectrum problems in rural areas (CD Oct 31 p6) indicates need to reform auction process, Rural Telecom Group (RTG) said. “The Commission needs to create smaller geographic license areas and mandate that carriers actually serve areas that they purchase in a timely manner,” RTG said. “It speaks volumes when 77% of surveyed companies do not plan to participate in upcoming auctions,” it said. Rural telcos’ “reticence to compete for spectrum has nothing to do with the demand for wireless services in these communities or the companies’ willingness to make infrastructure investments,” group said: “It has everything to do with an auction process that favors regional and national bidders at the expense of service to rural communities.”